First time backdoor Roth Question

[davdmrl]

Hello all,

This year will be my first full year working (graduated last May) and also the first time that I think I will need to do a backdoor Roth. My gross income will be $117k, and with only student loan interest as a deduction, I still believe I will be over the 2014 MAGI limit (I'm still a bit confused as to how you arrive at this value?) Anyways, I opened and maxed a Roth IRA this past year with Vanguard. My question is, can I start a traditional IRA, fully fund it, then sell those funds in order to purchase the same funds in my current roth (i.e. exchange)? Or will I end up creating another Roth account with this conversion? I'd prefer to keep as few accounts as possible for simplicities sake. Also will I be able to do this process online, or will I need to call to make the conversion?

Thanks in advance.
Dave

 

[Hopeful]

That is what we have done with Vanguard in the past. We open traditional IRA's before April 15th. I could not find that there is a minimum time to wait to convert, but I feel more comfortable waiting until later in the year to convert. Tax on the small profit is still low. I was able to do the conversion online at Vanguard, and transfer them into our existing Roths.

Like anything else, and especially with taxes, take what I say with a grain of salt. Perhaps others will chime in also.

 

[kaneohe]

see wksht on p.63 for MAGI calculation. Limit is 125K single for 2014 so you might be below limit. I don't know how VG works but my broker will just transfer securities from TIRA to Roth during a Roth conversion. Some folks prefer to have a separate account for new conversions so that you can recharacterize if desired using the "pure" performance of the new securities.
You can combine into a single account after the recharacterization period is over.

http://www.irs.gov/pub/irs-pdf/p590.pdf

 

[davdmrl]

Thank you for the replies. When I looked it up, I thought it said the lower bound of the MAGI range was 114k, with a hard cap at around 125k as you said. I'm sure I'd be able to contribute $5500-x, but I'd rather backdoor the full amount if I can.

 

[kaneohe]

Thank you for the replies. When I looked it up, I thought it said the lower bound of the MAGI range was 114k, with a hard cap at around 125k as you said. I'm sure I'd be able to contribute $5500-x, but I'd rather backdoor the full amount if I can.

You are correct. 2014 Retirement Account and HSA Figures « Fairmark.com Fairmark.com Sorry....running too fast w/o looking/thinking.